Precious metals are on course to post its second weekly decline in a row, including Gold and Silver as global bond yields keep on rising. One of the main reasons for the recent rise in bond yields are central bankers remarks over the past week.
Central bankers are back on the same page, while in the past some banks were adding to their stimulus packages, some were on hold, and others were tightening their policies like the Federal Reserve.
However, last week they all agreed that stimulus packages are likely to come to an end, sooner rather than later, spreading fears across all asset classes, including stocks and bonds.
Global bond yields had one of its best daily gains this year, which likely to be the next big challenge for central bankers.
Since their agreement until today, metals have been declining gradually, while bonds yields so far are posting its longest rising stakes.
For How Long Will This Last?
It’s all about central banks once again. For the time being, traders are pricing in tighter policies, which means that they will be looking for higher and safer returns.
No one knows for how long such move would last, but the risk is here to stay as a continuous rise in bond yields is not going to be good news for central bankers. Losing control over bonds would be the bank’s worst nightmare, which increases the risk of what so called the Bonds Bubble or the mother of all bubbles.
Yet, central banks are unlikely to be in a rush to sell their assets, despite the fact that the Fed has mentioned that they will start trimming the balance sheet later this year. The Fed also noted that the maximum amount of bonds they will sell on a monthly basis would not exceed $30B, which is nothing compared to the 4.5T balance sheet.
Silver Flash Crash Looks Like a Trading Error
Earlier this morning in Asia, Silver crashed by almost $2 in one minute candle, from 16.05 all the way to 14.30.
However, it recovered quickly and spiked back up within 3 minutes back to 15.97 and remained in a very tight range since then until this report is released.
Such move seems to be as trading error / system glitch and might be just what we call a fat finger. But it doesn’t change the weakness of silver that we saw over the past few weeks.
For the time being, Silver is still at risk to decline further over the coming weeks, especially after it failed to rebound above its $17.0.
As for today, we will keep an eye on the weekly close, which should be watched very carefully especially after the US Jobs Report, which will be released later today. The only scenario that would allow silver to rebound higher would be a disappointing Jobs Report. If so, silver will have another chance to rebound above 17.0 later next week. Otherwise, the weakness is here to stay.
Gold Higher Lows Is Still Intact
Despite the fact that Gold is still declining over the past two weeks, yet, it remains above the previous bottom at 1214, which was seen back in May of this year.
So far, Gold’s higher lows formation remains intact, but its close of being breached if Gold managed to trade below May’s lows.
Yet, today’s US Jobs Report might be the catalyst for another run higher, even if bond yields keep on rising.
Disappointing jobs report highly possible today, especially after three months of poor results, in addition to the ADP Non-Farm Employment Change, which came in less than expected as well.
Therefore, today’s jobs report will play a role; Gold buyers would be happy with another disappointment. If so, this would decrease the possibility of another rate hike by the Fed and the possibility of trimming the balance sheet, which in return would ease the upside momentum in bond yields.
Otherwise, a break below 1214 would change the bullish outlook of Gold to neutral, with a higher risk of breaking through 1200 in the coming weeks.